Zero emissions vehicles to pay 0% BIK tax

Following HM Treasury amendments, UK drivers of electric and alternatively fueled company cars will no longer have to pay Benefit In Kind (BIK) in the UK for the next tax year.

All zero emission company cars will attract a reduced rate of 0% in 2020-21, 1% in 2021-22, before returning to the planned 2% rate in 2022-23.

HM Treasury also announced that tax percentages for BIK will be reduced by two percentage points in 2020-21 before returning to planned rates over the following two years – increasing by one percentage point in 2021-22 and one percentage point in 2022-23. This will apply to company cars first registered from 6 April 2020.

Existing Vehicle Excise Duty (VED) rates will be maintained from April 2020. However, a call for evidence will be published later this year. This will seek views on moving towards a more dynamic approach to VED which recognises changes in CO2 emissions.

At the 2018 Budget, Chancellor Philip Hammond announced that the Treasury would have examined the impact that the introduction of WLTP would have had on vehicle taxes, including BIK and VED.

The NFDA responded to the consultation from the Treasury launched in February 2018. The key question asked was how the Government should have balanced the key factors when considering whether to introduce changes to VED and company car tax following the introduction of WLTP.

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Sue Robinson, director of the NFDA, said: “It is positive to see that the Government has provided additional clarity on the tax regime for company cars.”

Overall, the NFDA called for more clarity on BIK rates and highlighted the economic and political factors already putting the motor industry under pressure, also urging the Government to consider these when looking at WLTP’s introduction into the tax regime to minimise further impact on the sector.

Robinson added, “Further clarity on the company car tax regime, alongside the introduction of a zero-emission rate for company cars, will support the sales new vehicles.

“Although we are disappointed that, following the introduction of WLTP, the existing VED rates will remain in place, it is encouraging that the Government will continue to consider whether to move to ‘a more dynamic approach to VED’ as suggested by NFDA.

“NFDA will continue to call on the Government to rebalance VED payments across a car’s lifetime to incentivise purchases of newer, cleaner vehicles.”

Earlier this year, John Hargreaves, head of fleet and remarketing, and Steve Kitson, corporate communications director at Kia Motors UK, both spoke to industry and media at London’s Soho Hotel about Kia’s moves to EV, considerations over benefit-in-kind rates (BIK), and a look over the fleet industry as a whole.